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Category Archives: Postgraduate

On Wednesday 15 May, the School of Economics had the pleasure of welcoming Professor Jeffrey Wooldridge from Michigan State University for a Q&A and book signing, followed by a drinks reception. Professor Wooldridge is a globally recognised econometrician, lecturer and author, who wrote Introductory Econometrics: A Modern Approach, which is one of our core textbooks.

The Q&A session was hosted by Dr Olena Nizalova, who had been taught by Professor Wooldridge during her studies. The session focused on both the personal and professional aspects of Professor Wooldridge’s life, during which he discussed the role of education and what is needed to truly evaluate teachers and schools. He examined the challenges that analysts face when dealing with large amounts of money and talked about his work as a consultant for the US government and for large international cooperations.

Following the Q&A session, both students and staff enjoyed the opportunity to get their textbooks signed by the Professor, together with a photograph. Professor Wooldridge’s publishers Cengage and Blackwell’s bookshop were also present at the event.

The Kent School of Economics Spring newsletter is now available on our website. We produce a newsletter at the end of the Autumn and Spring terms to highlight some of the events and research that have taken place in the School.

Over the summer, we are lucky to be welcoming back three former PhD students to the School of Economics.

Marcelo Piancastelli di Siqueira, from University of Brazilia (13th June-14th September); Matteo Lanzafame, from University of Messina (25th June to 9th July), and Alex Ferreira, from University of Sao Paulo (28th June to 4th July).

They will be based in the Visitors Room, so make sure you get a chance to stop by and say hello.

The Kent School of Economics Spring newsletter is now available on our website. We produce a newsletter at the end of the Autumn and Spring terms to highlight some of the events and research that have taken place in the School.

Overall, the workshop was a success, with around 40 attendees from the School, and from other UK universities including Warwick, Queen Mary, Oxford, East Anglia, Bristol, Leicester, Essex and Middlesex Business School.

In modern theories of economic fluctuations, shocks that drive macroeconomic uncertainty are transformed into business cycles through a propagation mechanism. One such propagation mechanism can be inter-industry linkages: volatility at the industry level can translate into aggregate macroeconomic volatility. For this reason, understanding the sources of risk at the industry level is important. This is even more important in open economies, where industries are exposed to shocks arising in industries located in other countries.

In this paper, we ask the question what are the key sources of industry-level volatility in open economies? To do so, we separately identify how producer-country, industry, and demand shocks affect output volatility at the industry level as well as at the aggregate level. That is, we identify shocks that arise primarily at the level of the country where the industry is located, at the level of the industry regardless of location, and shocks arising at the destination markets for the industry’s products (which we loosely label demand shocks). Importantly, we explore the role played by international trade in two ways. First, our methodology separately accounts for demand shocks originating in the home and foreign markets. Second, we estimate the effect of trade openness on industrial volatility and its components allowing us to identify the main channels through which international trade affects industrial output volatility.

We exploit a multi-country, multi-industry dataset that is combined with bi-lateral trade statistics such that our unit of analysis is the amount sold in any destination market by an industry located in a particular country at a point in time. We use data for 34 countries, 19 manufacturing sectors, and 85 destination markets from 1980 to 2000. Methodologically, we develop a decomposition of this data structure that allows us to isolate the above mentioned sources of volatility.

Our results suggest that countries that are volatile in one industry tend to be volatile in other industries as well. Put simply, industrial output volatility does not depend substantially on industry-specific factors. It depends mostly on country-specific factors, such as exposure to aggregate shocks, sale diversification patterns, or both. Our decompositions show that demand risks account for most of the volatility of industrial output, with the contribution of trade-related demand risks depending on the composition of export destinations. We find that global demand risks and idiosyncratic risk to industries are very important drivers of volatility. Interestingly, at the aggregate level, idiosyncratic demand shocks appear to reduce volatility. This is because these shocks covary strongly negatively between industries, which we term “diversification through covariance”.

Finally, we find evidence that exports and intra-industry imports have opposite effects on industrial output volatility. In particular, exports reduce industrial volatility as they are targeted to countries with lower global demand volatility than the home market’s (a diversification effect). Intra-industry imports drive the positive relationship between industrial output volatility and trade at the industry level by increasing uncertainty in both domestic demand and production (competition and supply-chain effects).

Experts from the School of Economics Centre for European Agri-Environmental Studies have said the government must create suitable replacement support for UK farmers once the country leaves the European Union and Common Agricultural Policy (CAP) payments stop.

Analysis shows that the removal of the CAP without a replacement could risk the loss of about 250,000 jobs in non-farm small and medium-sized enterprises (SMEs), by considering both the direct and indirect effects of farmers’ purchasing power.

Furthermore, the majority of affected jobs, around 200,000, would be in highly rural areas, which would have a significant negative impact on rural job markets and economies.

The paper also notes that currently more than half of UK farms are heavily reliant upon CAP payments for their survival. Therefore, the government must think seriously about post-Brexit support to be put in place to ensure that UK farmers continue to contribute around 60% of domestic food supplies and to maintain the 70% of the UK land area they look after.

The paper adds that the government should see the end of access to the CAP as an opportunity to create a more effective system of subsidies that avoids the current situation where large, profitable farms receive the largest subsidies.

Dr Alastair Bailey said the government should see the situation as an opportunity to create a replacement to the CAP that could ensure those most in need of support were given the biggest focus of any new proposals.

Research by Dr Christian Siegel from the School of Economics has found that labour market polarisation caused by the decline of traditional middle-income jobs relative to low- and high-income jobs started as early as the 1950s.

The loss of middle-income manufacturing jobs, as witnessed in the US and most Western European countries, has usually been attributed to the rise of computers and software systems in the 1980s.

This is because computers allowed repetitive tasks to be automated, causing the loss of many manufacturing jobs such as in the automobile industry, but they complemented high-end service jobs, thereby increasing the demand for jobs in areas like banking or law.

However, Dr Siegel’s research examined US census data between 1950 and 2007 to assess types of employment and average salaries and found the trend for wage inequality started as far back as the 1950s.

The research attributes this to the major structural economic changes that occurred at this time, as the service economy within the US began to evolve.

This reduced the number of middle-income jobs available, and meant more workers ended up in either low-income or high-income employment as there were not as many middle-income jobs available.

This meant high-income jobs, as well as low-income jobs, grew at a faster rate, in terms of wages and employment opportunities,compared to middle-income jobs. This trend was then amplified by the arrival of IT systems in the 1980s, rather than caused by it.

The findings could have an impact on how governments tackle the growing issue of wage inequality as it suggests that one of the causes of rising wage inequality is the decline of manufacturing relative to services.

Since this structural change is inevitably linked to economic growth, reverting it would be very costly and lower average incomes. A better way to address challenges from rising inequality would be redistributive policies.

The School of Economics is seeking to appoint a post-doctoral research assistant to work on an EPSRC funded project ‘EconoMical, PsycHologicAl and Societal Impact of RanSomware (EMPHASIS)’. This project brings together a large number of researchers from across disciplines including computer science, law, psychology and economics, with expertise in cyber-security.

The successful applicant will work within the School of Economics, under the direction of Edward Cartwright and Anna Stepanova, and be involved with two parts of the project. One part of the project is to measure the economic consequences of ransomware; this will entail running surveys and experiments to put a monetary value on computer files, for individuals, firms and other organizations. Another part of the project is to investigate the optimal strategy of cyber-criminals and the ways in which law enforcement agencies can combat attack.

The post would appeal to someone with expertise in economic evaluation, experimental economics, game theory and/or industrial economics. No expertise in cyber-security is necessary but an interest in cyber-security and a willingness to engage with researchers across disciplines would be expected. The post would also give opportunity to interact with relevant user groups, such as law enforcement agencies, and to contribute to general models that can assist in combatting cyber-crime.